Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Most stocks are held by institutions. And it’s fair to say these institutional investors – the ones with infinitely more resources and knowledge than you have – don’t think stocks are overpriced – otherwise they wouldn’t hold them.
The mistake that you are making is the mistake at the core of the entire Buy-and-Hold project — assuming that stock investing is an intellectual activity when in fact it is primarily an emotional activity and only secondarily an intellectual activity.
My mother used to lament that my older brother smokes and she would say to me “Why does he do it? — he’s so smart!” Being smart has nothing to do with it. My older brother understands perfectly well that smoking is not a good thing to do. He is controlled by an emotional and physical addiction. So it is with all who believe that it is not necessary to practice price discipline when buying stocks, both ordinary individuals who do that and people who work in Wall Street institutions who have studied this stuff for years who do that.
Some of the people who work in the Wall Street institutions have doubts re Buy-and-Hold. Wade Pfau had studied this stuff for many years before he connected with me. He had doubts. Because he had doubts, I was able to persuade him of a lot of things that I would not have been able to persuade him of had he not already entertained those doubts. But his doubts were not as strong as my own, largely because at the time we connected I had been exploring my doubts on an in-depth basis for a number of years and he was only beginning to explore his. So he ultimately pulled back from his explorations. But he used to marvel at how I could teach him so many important things even though I had never studied this stuff in a formal way. The explanation of why that is possible is that it is not an intellectual lacking that causes people to believe in Buy-and-Hold, it is an emotional lacking, and I had been working on the emotional lacking that had once made me a Buy-and-Holder myself for a number of years before Wade and I met up.
We need to have every Buy-and-Holder alive exploring his or her doubts on a daily basis. That’s what this is all about. We have seen during the first 15 years of The Great Debate that there are thousands and thousands of our fellow community members who today entertain doubts about Buy-and-Hold. To help them see the merit of those doubts, we need to open every investing discussion board and blog on the internet to honest posting re safe withdrawal rates and scores of other critically important investment-related topics. That’s how we provide people with what they need to make an informed decision of their own as to which sort of strategy to follow.
The people who work in the Wall Street institutions are humans like all the rest of us. They have emotions like all the rest of us. So they have an inclination to fall for the Buy-and-Hold hype just like all the rest of us. To some extent, its worse for them. They have a personal investment in the hype, they make their living promoting it. They know that if they explore their doubts and discover that Buy-and-Hold is a big pile of smelly garbage, they will in all likelihood lose their jobs if they speak up in clear and firm and bold ways about what they know. So it is a benefit in this field today NOT to be a big-shot in some Wall Street firm. The big shots are more compromised than the rest of us.
But we are ALL compromised. We all carry a Get Rich Quick urge within us. We all need to be fighting that Get Rich Quick urge on a daily basis to have any realistic hope of seeing our retirement plans work out in the real world. We all need to have discussion boards and blogs that permit honest posting available to us to help us do that. The laws against financial fraud are much-needed laws and we all need to work together to insure that they are enforced in a reasonable manner in the investing realm.
My sincere take.